The trading pattern of the past two weeks – especially alongside cryptocurrency’s movement – suggests that stocks could continue to be volatile next week. The wild swings in Bitcoin make investors wonder if technology shares can gain traction after a rally attempt in the past week. NASDAQ rose slightly this week, helped by buying in biotech and large-cap growth stocks like Alphabet, Facebook, and Netflix, along with a positive move in tech.
The recent plunge in Bitcoin prices after China announced new regulations soured the mood for risk assets. Additionally, the IRS was urged to enforce its regulations more strictly. The Chinese government has announced a crackdown on Bitcoin mining and trading.Peter Boockvar, a chief investment officer of Blakeley Advisory Group, said the Bitcoin market is being bullied by where Bitcoin goes. Bitcoin fell by as much as 30% on Wednesday, to approximately $30,000. Despite recovering to above $42,000, it fell again on Friday.
Coin Metrics reported that Bitcoin was trading around $36,000 late Friday, down 9%. Boockvar called Bitcoin “the poster child of risk appetite.” When we’re being dragged along by Bitcoin, it means the stock market isn’t on a level playing field.”
Data on consumer confidence, home prices, and new home sales will be released this week. The durable goods report will be released Thursday, and the consumer sentiment report will be released Friday.
The Fed’s preferred inflation measure will be personal income and spending data, incorporating the ECAE price deflator. When the consumer price index for April was released last week, it showed core inflation at 3% year over year. The PCE price index was 1.8% higher in March compared to March of last year. Earnings season is winding down in the week ahead, but there are still earnings reports from retailers, such as Best Buy, Costco, and Nordstrom.
Latest prices of Bitcoin
- The S&P 500 index gained 1.13 % to 4369.55; Gold rose to 1808.4 $, + 0.31%
- The 10-year government bond yield was 1.358% on Friday, up from 1.297% on Thursday.
“The May price decline was dramatic, while the accumulation of Bitcoin sold in that downturn in longer-term holders took place during eight weeks of sideways price movements,” wrote Rooney. Defining a rally going into the fourth quarter as a good start for the end-of-summer is a good start.”
Short Bitcoin pile up
Bitfinex added more than 14,000 short Bitcoin sales to more than 5,000 short Bitcoin sales on Thursday. To balance their short exposure, shorts typically go long and close their positions when they close their short positions. Bitcoin is in a short-term downtrend that began in April, which implies pessimism will persist so long as the short-term retracement stays below June’s high. As a result of extreme pessimism, buyers may react to oversold conditions and drive the stock’s price higher.
A sign of froth led Rufer to sell Bitcoin
During five months, the UK investment manager Ruffer Investments reported a profit of $ 1.1 billion on its Bitcoin investment. Is there anything new? A blog post published by Duncan MacInnes, Investment Director at Ruffer, explained the price.
MacInnes wrote last November that the company began tracking Bitcoin. According to the company, “it can serve as an emerging store of value with a risk-reward profile that’s highly skewed and attractive.” However, retail speculation and peak liquidity pointed to foamy market conditions earlier in the year, prompting Ruffer to sell the entire Bitcoin stake before the end of April.
A comparison of Bitcoin and commodities
Over the past week, the correlation between Bitcoin and the S&P 500 has begun to rise, while the correlation between Bitcoin and commodities declines. Diversification of investments through stocks, commodities, and cryptocurrency may make Bitcoin appealing to investors looking for a more diversified approach.
According to Bloomberg Intelligence commodities strategist Mike McGlone, Bitcoin will outperform Brent crude this year. According to McGlone, Bitcoin is currently discounting crude oil in proportion to its premium. McGlone wrote in a report that the relative discount indicates that fundamentals will support a continued upward trend in the ratio.
The Bitcoin to crude oil ratio appears well placed to resume an uptrend, similar to the conditions in late 2016, primarily if a new low in Bitcoin volatility in late 2020 serves as a benchmark.”
Crypto traders sell “choke” as Bitcoin goes silent
Although Bitcoin is a downward spiral in a narrow range of more than $ 30,000, about half of the high it reached two months ago. Some options traders are pursuing relatively risky strategies to take advantage of the sustained price consolidation of the crypto.
One of these strategies to put “short strangles,” which involves betting the price of Bitcoin won’t hit its break-out point anytime soon.
QCP Capital, a Singapore-based investment firm, said in a Telegram post on June 30th that its favorite trade is short BTC strangles in the $ 30,000 to $ 40,000 range. According to our analysis, with psychological resistance of $ 40,000 and strong support at $ 30,000, trading can happen in this $ 10,000 area shortly, which could cause an increase in implied volatility.
The short strangle involves the sale of both call and put options with the exact maturity dates that are out-of-the-money (OTM). A call out of the money has an exercise price that is higher than the current Bitcoin price, whereas a put has a strike price lower than the current Bitcoin price.
The potential of USD coins
“USDC, which is the second-largest stablecoin by market capitalization, can become a mainstream alternative to the US dollar,” wrote Mati Greenspan, founder, and CEO of Quantum Economics, after the currency’s financier Circle revealed its plan to go public.
Currently, only one is widely available and fully compatible with all US regulations, and that was the USD coin, wrote Greenspan.
The stablecoin industry continues to grow, resulting in USDC gaining more shares. In the meantime, that largest stablecoin USDT is available at higher staking returns than USDC on some of the leading decentralized finance (DeFi) sites. Despite the availability and liquidity of rope, the USD coin is only seen as a safer and more stable investment vehicle, Greenspan wrote.
Summary of altcoins
- Price increase for EOS: The price of EOS rose 20.3% after its creator, Block. One entity, Bullish, announced its plan to merge with Far Peak Acquisition Corp., a Special Purpose Acquisition Company (SPAC) on the New York Stock Exchange. As part of the deal, Bullish plans to launch a cryptocurrency exchange while valuing the combined company at $ 9 billion.
- Growth in Euro stablecoin: Stablecoins linked to the euro have also grown considerably this year, reaching a circulating supply of nearly 80 million EURS tokens. Some may envision a future of forex markets on digital rails with this growth. Nonetheless, there are challenges with funding and regulations.